Azerbaijan is entering a new stage in the evolution of its energy economy. After the record levels of 2024–2025, natural gas production is expected to begin a gradual decline, reflecting the natural depletion of existing fields. Forecasts indicate that production will amount to around 48.4 billion cubic meters in 2026 and may fall to 45 billion by 2028. The share of marketable gas—used for domestic consumption and exports—will also shrink. For the first time in two decades, the country’s energy sector is facing a sustained downward trend that could reshape the configuration of its budget, exports, and macroeconomic outlook.
This dynamic compels Baku to balance its export commitments with domestic energy needs. Long-term gas supply contracts with the European Union extend through the middle of the century, while agreements with Türkiye are expected to be renewed in the coming years. Yet despite this formal stability of export arrangements, the country must adapt to shrinking production volumes to preserve its reputation as a reliable supplier within the Southern Gas Corridor. At the same time, a restructuring of energy asset management is underway—aimed at improving efficiency, introducing corporate governance standards, and attracting international investment. These processes signal a shift toward a more diversified management model where technological modernization and financial discipline become defining principles.
The decline in gas production inevitably reverberates through fiscal policy. Azerbaijan is preparing for lower hydrocarbon revenues while gradually reorienting toward the growth of non-oil sectors, which already demonstrate solid expansion. GDP structure data show a shift in favor of private enterprise, and non-energy tax revenues have become the backbone of fiscal stability. Meanwhile, the country’s strategic foreign exchange reserves remain at a high level, providing a vital buffer for the gradual reduction of transfers from the Oil Fund and for maintaining macroeconomic balance. Economic policy is increasingly built around the concept of a managed transition—from resource dependence to an economy supported by a broad production and investment base.
From an energy perspective, the coming years will be transitional. New Caspian fields—Absheron, Umid, and the deep-gas horizons of the Azeri–Chirag–Gunashli block—are expected to mitigate the decline, though their impact will be felt only toward the end of the decade. The combined potential of these projects is estimated at about eight billion cubic meters per year, enough to stabilize output after 2030. Until then, Azerbaijan will rely on optimizing existing capacities and channeling domestic investment toward infrastructure and energy efficiency.
In the long run, the decline in gas output may act as a catalyst for profound economic restructuring. This is not merely a matter of technological adaptation but of forging a new philosophy of growth—one where value is generated not through raw-material exports but through intellectual and industrial capacity. For Azerbaijan, this marks a moment of strategic reassessment: the country remains an energy hub of the region, yet it must begin to think in terms of post-hydrocarbon resilience. At the intersection of energy policy and structural reform lies the question of the country’s future economic model—one in which stability depends not on the volume of extraction, but on the quality of governance.
